By now you know the Dow dropped 800+ points yesterday as investors woke up to the reality of rising interest rates. One might say an 800-point drop in one day is overreacting, and it might be. Common sense, rational market thinking, and fundamental analysis would say that if rising interest rates were a “problem” then the market should have factored in higher interest rates when they first learned about them, which was, oh, about a year ago. But in that year the market has gone up-up-up.
If you think we’re trying to convince you that the markets are not fully rational you’re right. Investor psychology is probably the second biggest unknown in the market, besides the dreaded black swan. Yesterday’s drop was not a black swan event, however, because the market already knew about interest rates – for some reason, people just decided they had enough and bailed, big time. (Or was it the black boxes that hit their Sell buttons? We may find out about that in the coming days…)
In any case, what we want to do is try to make money from all this. And since we trade gold and gold miners, let’s look there. Gold miners have been in a deep funk lately so that’s probably the place we’ll see the biggest gains.